Ukraine Market Report — Q3 2019
A new parliament with a single-party majority, an anti-corruption court beginning work, and a legislative pace that produced more measures in three months than the previous three years.
Overview
The early parliamentary election in July produced a single-party majority — an outcome without precedent in Ukraine's independent history, where every previous parliament had required coalition negotiation.
The specialised anti-corruption court began operating in September.
What a single-party majority changed
Legislative throughput, immediately and dramatically.
Ukrainian reform had previously been constrained by the arithmetic of coalition assembly: every measure required negotiation across factions with different interests, and measures opposed by any significant group did not pass.
A single-party majority removed that constraint. Measures that had been blocked for years passed within months.
The commercial implication is double-edged and worth stating both ways. Speed is valuable when the measures are good — the land market reform, blocked for two decades, became possible for the first time. Speed is dangerous when they are not, because the check that coalition negotiation provided was removed along with the obstruction.
For a company, the practical consequence was that Ukrainian legislative risk became faster-moving in both directions. A regulatory change affecting your sector could now appear and pass within a single session.
The anti-corruption court
Its commencement completed the anti-corruption architecture: investigation, prosecution and now adjudication by a specialised body.
Whether it would change outcomes was the question the following years answered, and the answer has been partial — cases now conclude, but the pipeline from investigation to conviction remains narrow at the senior end.
Macro position
Growth continuing. Inflation falling toward target. Currency strong on portfolio inflows. Reserves rising.
Sectors
Exporters — continued margin compression from currency strength.
Agriculture — a strong harvest.
IT services — growing.
Energy — the new electricity market in its first months of operation.
What the quarter settled
That the legislative constraint on Ukrainian reform had been removed, and that from this point the question was no longer whether measures could pass but whether they were the right measures.
Related in this archive
Share this analysis
Comments